Prakash Chand Pradhan vs Union Of India And Anr

THE HIGH COURT OF SIKKIM : GANGTOK (Civil Extraordinary Jurisdiction) DATED : 29.08.2019 -------------------------------------------------------------------------------- SINGLE BENCH : THE HON'BLE MRS. JUSTICE MEENAKSHI MADAN RAI, JUDGE -------------------------------------------------------------------------------- WP(C) No.36 of 2018 Petitioner : Prakash Chand Pradhan versus Respondents : Union of India and Another

Petition under Article 226 of the Constitution of India --------------------------------------------------------------- Appearance

Mr. T.B. Thapa, Senior Advocate with Mr. Ashok Kumar Shahi, Mr. Ranjan Chettri and Mr. Khem Raj Sapkota, Advocates, for the Petitioner. Mr. Karma Thinlay, Central Government Advocate, for the Respondent No.1. Mr. Thupden Youngda, Government Advocate, for the Respondent No.2. ---------------------------------------------------------------

JUDGMENT

Meenakshi Madan Rai, J.

1. The Petitioner calls into question the appointment of

the Secretary-cum-Relief Commissioner, Land Revenue and

Disaster Management Department, Government of Sikkim, as an

Arbitrator, on 08.07.2016 by Respondent No.1, prior to the

Petitioner's application, dated 30.05.2018, seeking such

appointment. Maintaining that the appointment is bereft of the

eligibility criteria laid down in Section 12 read with the Fifth,

Sixth and Seventh Schedules of the Arbitration and Conciliation

Act of 1996, as amended in 2015, (hereinafter the "Act of

1996"), with no communication of such appointment being made

to the Petitioner, he seeks rescission of the Order supra and

issuance of a Writ of Mandamus or any other applicable Writ, WP(C) No.36 of 2018 2 Prakash Chand Pradhan vs. Union of India and Another

directing the Respondent No.1 to appoint a new sole Arbitrator in

conformity with the requisite legal provisions.

2. To comprehend the matter, we may briefly advert to

the facts as put forth by the Petitioner. Land belonging to the

Petitioner on a stretch from kilometre 51.870 to kilometre

53.900 on the National Highway, Rangpo Sub Division, was

acquired by the Ministry of Road Transport and Highways,

Government of India, in the year 2016, under the National

Highways Act, 1956, for widening of the "National Highway 10."

This intention was notified in the Gazette of India on 13.04.2016

and on receipt of the Report of the Competent Authority, a

Declaration under Section 3D(1) of the National Highways Act,

1956, (hereinafter the "N.H. Act"), was notified on 09.07.2016.

After such Declaration, the Petitioner submitted details to the

designated Competent Authority about the reasonableness of the

price, based inter alia on sale of land in the proximity, in the

preceding years. The Competent Authority, Respondent No.2,

however, ignoring the Petitioner's submissions, served a cheque

of Rs.10,92,04,010/- (Rupees ten crores, ninety two lakhs, four

thousand and ten) only, to the Petitioner, drawn on the AXIS

Bank, Tadong Branch, Gangtok, Sikkim, as compensation.

Although the cheque was received by him on 13.01.2017, under

protest and without prejudice to his legal rights, nevertheless,

aggrieved with the compensation, the Petitioner moved the

Respondent No.1 through the Respondent No.2 on 17.01.2017,

for appointment of an Arbitrator for determination of fair

compensation, under Section 3G(5) of the N.H. Act. When no WP(C) No.36 of 2018 3 Prakash Chand Pradhan vs. Union of India and Another

communication of appointment of Arbitrator for over ninety days

was received, the Petitioner filed a Petition under Section 11(4),

(5) and (6) of the Act of 1996, before this Court on 24.04.2017,

being Arbitration P. No. 01 of 2017, for appointment of an

Arbitrator. During the Court proceedings, the Respondent No.1

for the first time, informed this Court that the Secretary-cum-

Relief Commissioner, Land Revenue and Disaster Management

Department, Government of Sikkim, (hereinafter "Secretary,

LR&DM Department"), was appointed as an Arbitrator by the

Respondent No.1 on 08.07.2016. This appointment was made

prior to the date of Declaration and Notification, issued by the

Respondent No.1, dated 09.07.2016, for acquisition of the land.

Vide its Judgment dated 05.07.2017, this Court appointed an

Arbitrator, as prayed. Aggrieved by the Judgment, the General

Manager (Projects), National Highways and Infrastructure

Development Corporation Limited (hereinafter "NHIDCL") (the

Respondent No.2 in the Arbitration P. No. 01 of 2017), was

before the Hon'ble Supreme Court, who, by its Order dated

16.05.2018, set aside the Order of this Court with the

observation that, an application under Section 11 of the Act of

1996, for appointment of an Arbitrator to determine fair

compensation does not apply under the N.H. Act. It was further

held that if a demand is made for appointment of an Arbitrator

and the Central Government does not appoint an Arbitrator

within a reasonable time, the remedy thereof is by way of a Writ

Petition or a Suit. Pursuant to the Order dated 16.05.2018

(supra), the Petitioner, vide his letter dated 30.05.2018,

requested the Central Government to appoint an Arbitrator in WP(C) No.36 of 2018 4 Prakash Chand Pradhan vs. Union of India and Another

terms of Section 3G(5) of the N.H. Act, in place of the Secretary,

LR&DM Department, whose appointment did not meet the

requirements of the Act of 1996, as the Arbitrator is required to

be impartial and independent of the Central or State

Government and the land owner. Hence, the prayers as detailed

hereinabove.

3. Vide Interlocutory Application (I.A.) No.1 of 2019,

the Petitioner placed on record a copy of the letter addressed to

him by the Respondent No.1, dated 05.09.2018 as also a copy of

the Petitioner's related response, dated 02.01.2019. In the said

application, the fact of submission of letter dated 30.05.2018,

was reiterated. It was averred in response thereto, that the

Respondent No.1 issued letter dated 05.09.2018 to the

Petitioner, erroneously conveying that the Hon'ble Supreme

Court in its Order dated 16.05.2018 has upheld and allowed

continuation of the appointment of the Secretary, LR&DM

Department as the Arbitrator under Section 3G(5) of the N.H.

Act, by the Central Government. In reply, the Petitioner on

02.01.2019, pointed out that no such opinion had been

expressed by the Hon'ble Supreme Court in its Order.

4. The Respondent No.1, in his Counter-Affidavit,

would state that this Court vide the impugned Judgment, dated

05.07.2017, had appointed Justice A.P. Subba, retired Judge of

the High Court of Sikkim, as the Arbitrator on grounds that the

Central Government had failed to take steps for such

appointment within the prescribed time. The question in respect

of neutrality, impartiality and independence of Arbitrator was not WP(C) No.36 of 2018 5 Prakash Chand Pradhan vs. Union of India and Another

found relevant to the issue while disposing of the application as

being premature. It was also averred that the Hon'ble Supreme

Court, in its Order had observed that the argument of Counsel

for the Respondents therein (Petitioner herein), that the

Arbitrator had now been appointed under Section 11 of the Act

of 1996 and therefore no prejudice would be caused if allowed to

continue, ignored the fact that Section 11 of the Act of 1996

does not apply and that under Section 3G of the N.H. Act, the

Central Government alone can appoint an Arbitrator. Thus, the

Petitioner is now estopped from raising the same issue

pertaining to the appointment of an Arbitrator. That, in view of

the said Order of the Hon'ble Supreme Court, the Writ Petition is

barred by res judicata, as the issue involved between the said

parties has already been decided therein. That, the appointment

of an independent and impartial Arbitrator as raised in Paragraph

21 of the instant Writ Petition had been raised before the Hon'ble

Supreme Court in the said Civil Appeal and the Court had

rejected the same.

5. The Respondent No.2 had no Counter-Affidavit to file

and the Petitioner declined Rejoinder to the Counter-Affidavit of

Respondent No.1.

6. Learned Senior Counsel for the Petitioner, while

deprecating the inaction of the Respondent No.1 with regard to

appointment of an Arbitrator despite the Petitioner's letter dated

30.05.2018, contended that the appointment of the Secretary,

LR&DM Department is vitiated, being prior in time to any

application made by the Petitioner, and an Officer superior in line

in the hierarchy to the District Collector, East Sikkim WP(C) No.36 of 2018 6 Prakash Chand Pradhan vs. Union of India and Another

(Respondent No.2). The Respondent No.2 is the Competent

Authority designated under Section 3A of the N.H. Act and the

appointment of the Secretary, LR&DM Department, thereby

flouts the spirit of Section 12 and the related Schedules of the

Act of 1996. Besides, the Secretary, LR&DM Department, is an

Indian Administrative Service ("IAS") Officer and an employee of

the Central Government, his service conditions being governed

by the Central Government Rules and thus subject to the control

of the Central Government. He, therefore, cannot be held to be

independent of the Central Government and remain impartial

throughout the arbitral proceedings. While urging that the

neutrality of Arbitrators is of pivotal concern, strength was drawn

from the ratiocination in M/s. Voestalpine Schienen GMBH v. Delhi

Metro Rail Corporation Ltd.1. That, the Judgment, while examining

Section 12(5) of the Act of 1996 observed that the test of

neutrality is not whether, given the circumstances, there is any

actual bias but whether the circumstances in question give rise

to any justifiable apprehensions of bias. That, in the instant

matter, there is indeed a justifiable apprehension of bias in view

of the position of the Secretary, LR&DM Department, as posited

supra, hence the requirement for appointment of an independent

and impartial Arbitrator. To further augment his submissions,

succour was garnered from TRF Limited v. Energo Engineering

Projects Limited2. Reliance was also placed on Bharat Broadband

1 AIR 2017 SC 939 2 (2017) 8 SCC 377 WP(C) No.36 of 2018 7 Prakash Chand Pradhan vs. Union of India and Another

Network Limited v. United Telecoms Limited 3, wherein the

conditions for eligibility of an Arbitrator have been enumerated.

7. In vehement repudiation, learned Counsel Mr. Karma

Thinlay for the Respondent No.1, while reiterating the averments

in his Counter-Affidavit, would canvass that only the Central

Government has the prerogative of appointing an Arbitrator in

terms of Section 3G(5) of the N.H. Act, in pursuance to which,

an Arbitrator has already been put in place by the Central

Government on 08.07.2016. Although this may be prior in time

to the Petitioner's application but this was in consideration of the

circumstance that it was not only the Petitioner's land that was

acquired but also lands of several others being acquired for the

selfsame purpose. That, no law debars the Central Government

from appointing an Arbitrator prior in time to a petition being

filed by an aggrieved party. That, the apprehensions of bias are

unsubstantiated and the relevant provisions of law have not

been flouted. Contending that the Petitioner ought to appear

before the Arbitrator to settle any grievance, it was reasoned by

learned Counsel that the Hon'ble Supreme Court has not set

aside the appointment of the Arbitrator made on 08.07.2016.

While placing reliance on Suganthi Suresh Kumar v. Jagdeeshan4,

learned Counsel for the Respondent No.1 contended that the

High Court cannot override the decision of the Hon'ble Supreme

Court. Contending that the matter was already settled by the

Orders of the Hon'ble Supreme Court, he drew the attention of

this Court to Anil Kumar Neotia and Others v. Union of India and

3 AIR 2019 SC 2434 4 (2002) 2 SCC 420 WP(C) No.36 of 2018 8 Prakash Chand Pradhan vs. Union of India and Another

Others5 wherein it has been ruled out that once a question is

settled by the Hon'ble Supreme Court, it is no longer open for

agitation by the Petitioners. Reliance was also placed on Sabia

Khan and Others v. State of U.P. and Others 6 to press the argument

that the Order of the Hon'ble Supreme Court has not been

understood in its correct perspective by the Petitioner insofar as

the appointment of the Appellant is concerned. That, the

Petitioner cannot question the correctness of the Order of the

Court through a petition under Article 226 of the Constitution of

India, before this Court when it is settled that there is no

irregularity in the appointment of the Arbitrator made on

08.07.2016. Thus, the petition be dismissed.

8. The rival contentions were heard at length,

considered and all documents on record duly perused as also the

citations made at the Bar.

9. I deem it essential to first refer to the Order of the

Hon'ble Supreme Court dated 16.05.2018 in Civil Appeal No.

5250 of 2018 (Arising out of S.L.P. (C) No. 20049 of 2017). This

Order came to be pronounced in a challenge to a Judgment of

this Court appointing an Arbitrator under Section 11 of the Act of

1996, dated 05.07.2017, in Arb. P. No.01 of 2017 between the

Petitioner herein and the Respondents No.1 and 2, and the

General Manager (Projects), NHIDCL (as Respondent No.2 in the

said petition). Setting aside the Judgment dated 05.07.2017, the

Hon'ble Supreme Court in its Order supra, considered Section 3G 5 (1998) 2 SCC 587 6 (1999) 1 SCC 271 WP(C) No.36 of 2018 9 Prakash Chand Pradhan vs. Union of India and Another

of the N.H. Act dealt with Sub Sections 5 and 6 of Section 3G

and inter alia held as follows;

"A cursory reading of sub-section (5) shows us that appointment of the arbitrator under the said sub-section is only in the hands of the Central Government. Sub- section (6) begins with the important expression "subject to the provisions of this Act", the provisions of the Arbitration and Conciliation Act, 1996 shall apply.

Having heard learned counsel for the parties, we are, therefore, of the view that a Section 11 application under the 1996 Act cannot be made as the Central Government alone is to determine who is to be an arbitrator under Section 3-G (5) of the National Highways Act. If a demand is made for the appointment of an arbitrator, and the Central Government does not appoint an arbitrator within a reasonable time, the remedy that is to be availed of is a writ petition or a suit for the said purpose, and not Section 11 of the Arbitration and Conciliation Act, 1996.

A similar provision contained in Section 86 (1)(f) of the Electricity Act, 2003 specifically gives the State Commission power to refer any dispute for arbitration. In this view of the matter, this Court in Gujarat Urja Vikas Nigam Ltd. vs. Essar Power Ltd., (2008) 4 SCC 755, held as under:

"28. Section 86(1)(f) is a special provision and hence will override the general provision in Section 11 of the Arbitration and Conciliation Act, 1996 for arbitration of disputes between the licensee and generating companies. It is well settled that the special law overrides the general law. Hence, in our opinion, Section 11 of the Arbitration and Conciliation Act, 1996 has no application to the question who can adjudicate/arbitrate disputes between licensees and generating companies, and only Section 86(1)(f) shall apply in such a situation."

We respectfully agree with the ratio of the said judgment. Likewise, Section 3-G of the National Highways Act is a special provision which will be given effect insofar as the appointment of an arbitrator is concerned.

Learned counsel appearing on behalf of the respondents has, however, argued that an arbitrator has now been appointed under Section 11 of the Arbitration and Conciliation Act, 1996 and, that, therefore, no prejudice will be caused if he is allowed to continue. This arguments ignores the fact that Section 11 of the Arbitration and Conciliation Act does not apply and that, under Section 3-G, the Central Government alone can appoint an arbitrator.

Accordingly, the impugned Judgment is set aside and the appeals are allowed. ..."

The Hon'ble Supreme Court has thus spelt out that Section 3G of

the N.H. Act is a special provision which will be effected insofar WP(C) No.36 of 2018 10 Prakash Chand Pradhan vs. Union of India and Another

as appointment of an Arbitrator is concerned. The provisions of

Section 3G(5) and (6) of the said Act, have been lucidly

explained as also the legal position that it envisages.

10. For convenience, Section 3G (5) and (6) of the N.H.

Act is extracted hereinbelow;

"3G. Determination of amount payable as compensation. - (1) ... (2) ... (3) ... (4) ...

(5) If the amount determined by the competent authority under sub-section (1) or sub-section (2) is not acceptable to either of the parties, the amount shall, on an application by either of the parties, be determined by the arbitrator to be appointed by the Central Government. (6) Subject to the provisions of this Act, the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall apply to every arbitration under this Act. ..."

(emphasis supplied)

Section 3G(5) supra specifically provides that should the

compensation determined by the Competent Authority be

unacceptable to either of the parties, an Arbitrator shall

determine the amount on an application by either of the parties.

The Arbitrator is to be appointed by the Central Government. In

my considered opinion, the Section provides with clarity that

appointment of an Arbitrator shall be subsequent to an

application made by either of the parties, on dissatisfaction of

either party of the amount of compensation determined by the

Competent Authority. At this juncture, it may suitably be noted

that the application for appointment of an Arbitrator was made

by the Petitioner on 30.05.2018 while the Notification of

intention of acquisition was published on 13.04.2016 and

Declaration of acquisition notified on 09.07.2016, by the

Respondent No.1. Curiously, despite the above position, the WP(C) No.36 of 2018 11 Prakash Chand Pradhan vs. Union of India and Another

Arbitrator was appointed on 08.07.2016 itself, even before the

Declaration of 09.07.2016, was notified. The Respondent No.1

has failed to satisfy this Court as to which provision permits such

a step and allows them to bypass or circumvent the provisions of

the statute. The law does not envisage putting an Arbitrator in

place preceding an application of any aggrieved party or for that

matter, before publication of notification of Declaration.

11. That having been said, Section 12 of the Act of 1996,

has to be given due consideration in tandem with the Fifth, Sixth

and Seventh Schedules of the Act. Section 12, it may be stated,

provides for grounds of challenge to the appointment of an

Arbitrator, which, to prevent prolixity, are not extracted herein.

The provisions of the Fifth and Seventh Schedules of the Act of

1996, relied on by the Petitioner, provides as follows;

"THE FIFTH SCHEDULE [See section 12(1)(b)] The following grounds give rise to justifiable doubts as to the independence or impartiality of arbitrators:

Arbitrator's relationship with the parties or counsel

1. The arbitrator is an employee, consultant, advisor or has any other past or present business relationship with a party.

2. The arbitrator currently represents or advises one of the parties or an affiliate of one of the parties.

3. ...

4. ...

5. ...

6. ...

7. ...

8. ...

9. ...

10. ...

11. ...

12. The arbitrator is a manager, director or part of the management, or has a similar controlling influence in one of the parties.

13. ...

14. The arbitrator regularly advises the appointing party or an affiliate of the appointing party, and the arbitrator or his or her firm derives a significant financial income therefrom.

WP(C) No.36 of 2018 12 Prakash Chand Pradhan vs. Union of India and Another

Relationship of the arbitrator to the dispute

15. ...

16. The arbitrator has previous involvement in the case."

"THE SEVENTH SCHEDULE [See section 12(5)]

Arbitrator's relationship with the parties or counsel

1. The arbitrator is an employee, consultant, advisor or has any other past or present business relationship with a party.

2. The arbitrator currently represents or advises one of the parties or an affiliate of one of the parties.

3. ...

4. ...

5. The arbitrator is a manager, director or part of the management, or has a similar controlling influence, in an affiliate of one of the parties if the affiliate is directly involved in the matters in dispute in the arbitration.

6. ...

7. ...

8. The arbitrator regularly advises the appointing party or an affiliate of the appointing party even though neither the arbitrator nor his or her firm derives a significant financial income therefrom.

9. ...

10. ...

11. ...

12. The arbitrator is a manager, director or part of the management, or has a similar controlling influence in one of the parties.

13. ...

14. ...

Relationship of the arbitrator to the dispute

15. ...

16. The arbitrator has previous involvement in the case."

A bare perusal of the provisions extracted hereinabove prohibits

appointment of a person as an Arbitrator, should the conditions

enumerated therein be fulfilled. Apart from the above two

Schedules, the Sixth Schedule requires the Arbitrator to disclose

any past or present relationship with or interest in any of the

parties or in relation to the subject matter in dispute whether

financial, business, professional or other kind, which is likely to

give rise to justifiable doubts as to the Arbitrator's independence

or impartiality. It is the Petitioner's case that no such disclosure WP(C) No.36 of 2018 13 Prakash Chand Pradhan vs. Union of India and Another

was made by the Arbitrator who is a Central Government

employee.

12. We may, thus, examine whether the appointment of

the Arbitrator stands vitiated on account of non-compliance of

the mandate of the statutes. In this context, we may appositely

refer to Bharat Broadband Network Limited (supra). The Hon'ble

Supreme Court was considering an Appeal filed by Bharat

Broadband Network Limited against the United Telecoms

Limited. The Appellant floated a tender dated 05.08.2013 for

installation of certain equipments. The Respondent was the

successful bidder. The conditions of Contract provided for

arbitration. As disputes and differences arose between the

parties, the Respondent invoked the Arbitration Clause vide

letter dated 03.01.2017 and called upon the Appellant's

Chairman and Managing Director to appoint an independent and

impartial Arbitrator. One K.H. Khan was appointed as the sole

Arbitrator on 17.01.2017. In the meanwhile, on 03.07.2017, the

Hon'ble Supreme Court vide its Judgment in TRF Limited (supra)

held that since a Managing Director of a Company, which was

one of the parties to the arbitration was himself ineligible to act

as Arbitrator, such ineligible person could not appoint an

Arbitrator and any such appointment would have to be held null

and void. Consequently, the Appellant, Bharat Broadband

Network Limited, itself having appointed the aforestated sole

Arbitrator, referred to the Judgment supra and stated that being

a declaration of law, appointments of Arbitrators made prior to

the Judgment are not saved. Thus, the prayer before the sole WP(C) No.36 of 2018 14 Prakash Chand Pradhan vs. Union of India and Another

Arbitrator was that since he is de jure unable to perform his

function as Arbitrator, he should withdraw from the proceedings

to allow the parties to approach the Hon'ble Court for

appointment of a substitute Arbitrator in his place. Shri Khan on

21.10.2017, rejected the Appellant's application after hearing

both sides sans reasons. The petition thus came to be filed

before the Hon'ble High Court of Delhi on 28.10.2017 under

Sections 14 and 15 of the Act of 1996 stating that the Arbitrator

had become de jure incapable of acting as such and a substitute

Arbitrator be appointed. The Hon'ble High Court of Delhi, vide

the impugned Judgment dated 22.11.2017 rejected the petition

stating that the very person who appointed the Arbitrator is

estopped from raising a plea that such Arbitrator cannot be

appointed after participating in the proceedings. It was also

pointed out that under the proviso to Section 12 (5) of the Act of

1996, the Appellant had appointed Shri Khan while the

Respondent had filed a statement of claim without any

reservation in writing, which would amount to an express

agreement in writing and, therefore be a waiver to the

applicability of Section 12 (5) of the Act of 1996. In Appeal, the

Hon'ble Supreme Court, discussed the ratiocinations in

Voestalpine Schienen GMBH (supra), HRD Corporation v. GAIL

(India) Ltd.7 and TRF Ltd. (supra), which had dealt with Section

12(5) of the Act of 1996, the Fifth and Seventh Schedules of the

Act of 1996, as also the indispensable requirement of impartiality

7 (2018) 12 SCC 471 WP(C) No.36 of 2018 15 Prakash Chand Pradhan vs. Union of India and Another

and neutrality in an Arbitrator. The Hon'ble Supreme Court

concluded as hereinbelow;

"14. From a conspectus of the above decisions, it is clear that Section 12(1), as substituted by the Arbitration and Conciliation (Amendment) Act, 2015 ["Amendment Act, 2015"], makes it clear that when a person is approached in connection with his possible appointment as an arbitrator, it is his duty to disclose in writing any circumstances which are likely to give rise to justifiable doubts as to his independence and impartiality. The disclosure is to be made in the form specified in the Sixth Schedule, and the grounds stated in the Fifth Schedule are to serve as a guide in determining whether circumstances exist which give rise to justifiable doubts as to the independence or impartiality of an arbitrator. ...

15. Section 12(5), on the other hand, is a new provision which relates to the de jure inability of an arbitrator to act as such. Under this provision, any prior agreement to the contrary is wiped out by the non- obstante clause in Section 12(5) the moment any person whose relationship with the parties or the counsel or the subject matter of the dispute falls under the Seventh Schedule. The sub-section then declares that such person shall be "ineligible" to be appointed as arbitrator. The only way in which this ineligibility can be removed is by the proviso, which again is a special provision which states that parties may, subsequent to disputes having arisen between them, waive the applicability of Section 12(5) by an express agreement in writing. What is clear, therefore, is that where, under any agreement between the parties, a personal falls within any of the categories set out in the Seventh Schedule, he is, as a matter of law, ineligible to be appointed as an arbitrator. ..."

Resultantly, the Appeals were allowed, the impugned Judgment

set aside and the High Court was to appoint a substitute

Arbitrator with the consent of both parties.

13. It would be worthwhile to notice that in Voestalpine

Schienen GMBH (supra), the Hon'ble Supreme Court held as

follows;

"23. It also cannot be denied that the Seventh Schedule is based on IBA guidelines which are clearly regarded as a representation of international based practices and are based on statutes, case law and juristic opinion from a cross-section on jurisdiction. It is so mentioned in the guidelines itself."

Xxx xxx xxx WP(C) No.36 of 2018 16 Prakash Chand Pradhan vs. Union of India and Another

"25. Section 12 has been amended with the objective to induce neutrality of arbitrators viz. their independence and impartiality. The amended provision is enacted to identify the "circumstances" which give rise to "justifiable doubts" about the independence or impartiality of the arbitrator. If any of those circumstances as mentioned therein exists, it will give rise to justifiable apprehension of bias. The Fifth Schedule to the Act enumerates the grounds which may give rise to justifiable doubts of this nature. Likewise, the Seventh Schedule mentions those circumstances which would attract the provisions of sub-section (5) of Section 12 and nullify any prior agreement to the contrary. In the context of this case, it is relevant to mention that only if an arbitrator is an employee, a consultant, an advisor or has any past or present business relationship with a party, he is rendered ineligible to act as an arbitrator. Likewise, that person is treated as competent to perform the role of arbitrator, who is a manager, director or part of the management or has a single controlling influence in an affiliate of one of the parties if the affiliate is directly involved in the matters in dispute in the arbitration. Likewise, persons who regularly advised the appointing party or affiliate of the appointing party are incapacitated. A comprehensive list is enumerated in Schedule 5 and Schedule 7 and admittedly the person empanelled by the respondent are not covered by any of the items in the said list."

In HRD Corporation v. GAIL (India) Ltd.8, it was held as

hereinbelow;

"12. After the 2016 Amendment Act, a dichotomy is made by the Act between persons who become "ineligible" to be appointed as arbitrators, and persons about whom justifiable doubts exist as to their independence or impartiality. Since ineligibility goes to the root of the appointment, Section 12(5) read with the Seventh Schedule makes it clear that if the arbitrator falls in any one of the categories specified in the Seventh Schedule, he becomes "ineligible" to act as arbitrator. Once he becomes ineligible, it is clear that, under Section 14(1)(a), he then becomes de jure unable to perform his functions inasmuch as, in law, he is regarded as "ineligible." ..."

In TRF Ltd. (supra) the Hon'ble Supreme Court held as under;

"50. First, we shall deal with Clause (d). There is no quarrel that by virtue of Section 12(5) of the Act, if any person who falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as the arbitrator. There is no doubt and cannot be, for the language employed in the Seventh Schedule, the

8 (2018) 12 SCC 471 WP(C) No.36 of 2018 17 Prakash Chand Pradhan vs. Union of India and Another

Managing Director of the Corporation has become ineligible by operation of law. It is the stand of the learned Senior Counsel for the appellant that once the Managing Director becomes ineligible, he also becomes ineligible to nominate. Refuting the said stand, it is canvassed by the learned Senior Counsel for the respondent that the ineligibility cannot extend to a nominee if he is not from the Corporation and more so when there is apposite and requisite disclosure. ..."

14. More recently, on 27.08.2019, the Hon'ble Supreme

Court, in National Highways Authority of India v. Sayedabad Tea

Company Ltd. and Ors.9, while agreeing with the legal position

exposited in General Manager (Project), National Highways and

Infrastructure Development Corporation Ltd. v. Prakash Chand

Pradhan & Ors. and discussing Section 3G(5) of the N.H. Act,

would also elaborate as follows;

"16. ... It is a comprehensive code and a special enactment which provides an inbuilt mechanism not only in initiating acquisition until culmination of the proceedings in determining the compensation and its adjudication by the Arbitrator to be appointed by the Central Government and if still remain dissatisfied, by the Court of law.

17. In compliance of the mandate of Sections 3A to 3F of the Act, 1956, after the land is acquired, there shall be paid an amount of compensation which shall be determined by an order of the competent authority under sub-sections (1) or (2) of Section 3G of the Act, 1956 and any person who is aggrieved by the amount so determined by the competent authority or what being determined is not acceptable to either of the parties, on an application being filed by either of the parties, has to be determined by the Arbitrator to be appointed by the Central Government in terms of sub-section (5) of Section 3G of the Act, 1956."

This Judgment postulates with clarity that if the amount

determined by the Competent Authority is not to the satisfaction

of any aggrieved person, on an application being filed by either

of the parties, the Central Government is to appoint an

Arbitrator for determination of the compensation amount, in

9 Civil Appeal No(s).6958-6959 of 2009 WP(C) No.36 of 2018 18 Prakash Chand Pradhan vs. Union of India and Another

terms of Sub Section 5 of Section 3G of the N.H. Act. The

appointment of an Arbitrator it emanates, is obviously to be

followed by an application filed by any aggrieved party.

15. On the bedrock of these precedents, in the matter at

hand, it goes without saying that the Arbitrator i.e. the

Secretary, LR&DM Department, is an IAS Officer. The

Respondent No.1, is the Secretary, Ministry of Road Transport

and Highways. Both are part and parcel of the Central

Government, IAS Officers being Central Government Officers

working under the State Governments. These Officers are

recruited and trained by the Central Government and then

allotted to different State cadres. In the same thread, the

District Collector, East District, Respondent No.2, being a

Government servant, is subordinate to the Respondent No.1.

Even assuming that the District Collector belongs to the State

cadre, he is subordinate to the Secretary, LR&DM Department.

The parties in dispute must have the confidence that they would

be meted out even handed justice by the Arbitrator on the

edifice of the presumption that he is independent and impartial.

Should there be existence, either direct or indirect, of a

relationship of the sole Arbitrator with any of the parties,

professional or otherwise, as envisaged in the Fifth and Seventh

Schedules of the Act of 1996, this is likely to give rise to

justifiable doubts as to his independence or impartiality. A

cursory reading of the provisions of the Fifth and Seventh

Schedules of the Act of 1996, would indicate that these

provisions have clearly been circumvented by the Respondent WP(C) No.36 of 2018 19 Prakash Chand Pradhan vs. Union of India and Another

No.1, as also the Sixth Schedule of the Act. Besides which, the

appointment of the Secretary, LR&DM Department, has been

made prior in time to the application of the Petitioner.

16. To address the argument of the Respondent No.1

that the question of neutrality, impartiality and independence of

the Arbitrator was not found relevant, in the impugned Judgment

of this Court dated 05.07.2017, it would be relevant to point out

that the Court has qualified the statement by adding that,

"The appointment of the Arbitrator made by the Central Government before 08th July 2016 is found as invalid. In such view, the Court is not inclined to examine this issue at this stage as it is premature."

17. The further contention of the Respondent No.1 that

the Petitioner is estopped from raising the issue pertaining to

appointment of Arbitrator in view of the Order of the Hon'ble

Supreme Court dated 16.05.2018 is unfathomable and appears

to be an incorrect interpretation of the said Order. The Order

clearly spells out as follows;

"... Learned counsel appearing on behalf of the respondents has, however, argued that an arbitrator has now been appointed under Section 11 of the Arbitration and Conciliation Act, 1996 and, that, therefore, no prejudice will be caused if he is allowed to continue. This arguments ignores the fact that Section 11 of the Arbitration and Conciliation Act does not apply and that, under Section 3-G, the Central Government alone can appoint an arbitrator. ..."

One of the Respondents before the Hon'ble Supreme Court, is

the Petitioner in the instant petition. Obvious reference was

being made to the appointment of Justice A.P. Subba as the

Arbitrator, vide the impugned Judgment of this Court, dated

05.07.2017. On this question, the Hon'ble Supreme Court has

clarified that this argument of the Respondents therein (the WP(C) No.36 of 2018 20 Prakash Chand Pradhan vs. Union of India and Another

Petitioner here), ignores the fact that Section 11 of the Act of

1996 does not apply as under Section 3G of the N.H. Act, the

Central Government alone can appoint an Arbitrator. It clarifies

the position of law that the appointment of an Arbitrator under

Section 11 of the Act of 1996 is inapplicable to matters as the

instant one. The merits of the appointment of Secretary, LR&DM

Department, as an Arbitrator on 08.07.2016, as sought to be

made out by Respondent No.1, in its correspondence dated

05.09.2018, has not been discussed by the Hon'ble Supreme

Court. Neither does the Order observe that such appointment is

upheld by the Hon'ble Supreme Court. It is undisputed that the

Respondent No.1 is clothed with the powers to appoint an

Arbitrator but this is in compliance to the provisions of Section

3G(5) of the N.H. Act, and not otherwise. Therefore, in my

considered opinion, the Order of the Hon'ble Supreme Court has

been misconceived and misinterpreted by the Respondent No.1.

No question of the Petitioner being estopped from raising the

issue pertaining to appointment of Arbitrator arises.

18. The averment of the Respondent No.1 that the

Hon'ble Supreme Court had rejected the contention of the

Petitioner seeking appointment of an independent and impartial

Arbitrator, is shorn of any truth, and is to say the least, a

ludicrous interpretation. The ratiocinations discussed

hereinabove clearly reflects the stance of the Hon'ble Supreme

Court on this aspect and it has been exposited without any

ambiguity that neutrality, independence and impartiality, are the

hallmark of an Arbitrator which has to be maintained. This Court

is by no stretch of the imagination making any effort to go WP(C) No.36 of 2018 21 Prakash Chand Pradhan vs. Union of India and Another

beyond the Order of the Hon'ble Supreme Court, being well

aware of the sanctity of Article 141 and Article 144 of the

Constitution, thus, the Judgments relied on by learned Counsel

for the Respondent No.1, in this context, are of no assistance to

his case.

19. In view of the discussions that have ensued

hereinabove, the Writ Petition is allowed and disposed of, with

the following directions;

(i) The Order dated 08.07.2016 issued by the

Respondent No.1 stands rescinded;

(ii) The Respondent No.1 is hereby directed to appoint a

new sole Arbitrator in terms of Section 3G(5) of the

N.H. Act duly conforming with the provisions of

Section 12 of the Act of 1996, as amended in the

year 2015, and adhering with the Fifth, Sixth and

Seventh Schedules of the said Act.

20. No order as to costs.

( Meenakshi Madan Rai ) Judge 29.08.2019

Approved for reporting : Yes ml Internet : Yes